Fossil fuels make a comeback in Europe
Energodigest | 9 March 2023
Although energy price inflation in the euro area is slowing (from 41.5% last October to 13.7% in February[1]), prices remain high, while consumers have to increasingly rely on fossil fuels as a more easily available source. Against this backdrop, carbon prices climbed above €100 per tonne in late February, for the first time ever (see Fig. 1).
According to Ember, the share of fossil fuels in EU power generation hit a four-year high of 39.4% in 2022, up from 37.3% a year earlier, with gas accounting for 19.9% and coal accounting for almost 16.0%, also the highest level in four years (see Fig. 2). Yet such a notable rise of hydrocarbons in the region’s energy consumption has not translated into a comparable increase in power sector emissions, which grew a scant 3.4% YoY against a 3% drop in power generation, to 2,794 TWh, while total CO2 emissions in the EU declined 2.5% YoY, as reported by the IEA.[2]
European industrialists question the viability of energy subsidies, saying that governments should focus on reducing demand for carbon-heavy fuels and push harder for renewables instead of trying to compensate growing energy costs.[3] In their opinion, current measures are targeting the symptoms rather than the underlying cause of the disease and must be eventually replaced with a more sustainable strategy.
The loosening of emissions controls could trigger additional risks. The EU’s energy commissioner warns that, with the reduced frequency of site inspections, the bloc could fall behind its climate goals.[4] Major loopholes in the EU’s methane regulation would allow coal mines to release an additional 2.2 million tonnes of methane emissions by 2050, equivalent of the combined annual CO2 emissions of Belgium and the Czech Republic.[5]
It now seems increasingly doubtful that the bloc will meet its earlier pledge to reduce emissions by at least 55% by 2030. While it’s becoming harder to agree on the timing of particular clean energy goals (as in the case of the combustion engine phaseout[6]), the EU may have to compromise its principles and wake up to the fact that a hasty ban on fossil fuels could come with a major economic toll.
The loosening of emissions controls could trigger additional risks. The EU’s energy commissioner warns that, with the reduced frequency of site inspections, the bloc could fall behind its climate goals.[4] Major loopholes in the EU’s methane regulation would allow coal mines to release an additional 2.2 million tonnes of methane emissions by 2050, equivalent of the combined annual CO2 emissions of Belgium and the Czech Republic.[5]
It now seems increasingly doubtful that the bloc will meet its earlier pledge to reduce emissions by at least 55% by 2030. While it’s becoming harder to agree on the timing of particular clean energy goals (as in the case of the combustion engine phaseout[6]), the EU may have to compromise its principles and wake up to the fact that a hasty ban on fossil fuels could come with a major economic toll.